WASHINGTON, Feb 14 U.S. farmers will plant crops
this spring under the shadow of a persistent drought that grips
prime farmland from the Mississippi River to the Rocky
Mountains, with grain supplies already tight from drought losses
in 2012.

In all, 56 percent of the contiguous United States is under
moderate to exceptional drought, twice the usual amount, the
Senate Agriculture Committee was told on Thursday.

Arid weather was expected to run until May in the
wheat-growing Plains and in the western Corn Belt, where corn
and soybeans are the major crops.

"In fact, we are forecasting drier conditions," said Roger
Pulwarty, director of the National Integrated Drought
Information System, a federal agency. Above-normal rainfall
benefited the southern Plains at the start of this year.

Wheat, corn and soybeans are the most widely grown U.S.
crops and form the foundation of the U.S. food supply. They are
used in livestock rations and as ingredients in food ranging
from salad dressing to bread, breakfast cereal and cookies.

MOST OF WINTER WHEAT IS UNDER DROUGHT

Some 59 percent of winter wheat was under drought
conditions, said Joe Glauber, Agriculture Department chief
economist. "While that also implies that spring planting may be
affected by drought conditions as well, there have been
improvements in the eastern Corn Belt, where many areas are no
longer experiencing drought."

With adequate rainfall during the growing season, U.S.
yields will rebound to normal levels, leading to bumper corn and
soybean crops. In turn, commodity prices would fall as
near-empty grains bins are filled. The corn stockpile is
expected to be smallest in 17 years by harvest-time this year.

The government's three-month outlook says drought will
persist in the central and southern Plains and the U.S.
Southwest while easing in Iowa, Missouri, Wisconsin, Minnesota
and the Dakotas.

Most of U.S. cattle and hay production areas are under
drought conditions, said Glauber. Ranchers and cattle feeders
culled herds as pastures withered and feed costs soared in 2012.

"Particularly for cattle producers, the next four to five
months are critical," said Glauber. "Hopefully, some spring
rains to get pasture conditions back up" while abundant crops in
the fall "should help relieve feed prices."

ONLY 1934 DROUGHT WAS WORSE THAN 2012

The 2012 drought ranks second to 1934 as the most widespread
and severe drought, said Pulwarty. But in the Midwest, 2012 was
the driest summer on record with half of the usual rainfall.

Crop insurers paid a record $14.2 billion as of Monday for
crop losses in 2012, almost all due to drought. The old record
was $10.8 billion in 2011, also a drought year.

Indemnities could total as high as $16 billion or $17
billion when all claims are settled, said Glauber. USDA oversees
the federally subsidized insurance program.

"The western Corn Belt remains dry, no doubt about it,"
Glauber said after the hearing. He said rainfall and
temperatures in late summer, when corn and soybeans mature, are
far more important than early-season moisture levels in
determining yield.

Dec 9 American Airlines Group Inc said
higher average fares per mile have boosted its revenue and
profit expectations for the fourth quarter, a day after rival
United Continental Holdings Inc also raised forecasts.

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